UK house prices fall again

UK house prices fell in December for the second time in three months, new figures reveal.

09:04 30 December 2004

UK house prices fell in December for the second time in three months, new figures reveal.

According to the Nationwide building society, the average price of a home fell 0.2 per cent this month, down from a gain of 0.9 per cent in November.

The December slowdown means that the average value of a UK home rose by just over 17,000 over the year, or 47 a day. The average property now costs 152,623.

Nationwide found that the annual rate of increase dropped from 15 per cent in November to 12.7 per cent this month, the lowest level in three years.

Analysts claim that the UK property boom of recent years is now coming to an end as markets show strong signs of slowing.

"The recent slowdown in monthly house price growth and the falls in housing market activity, in part, reflect the changing economic backdrop," said Alex Bannister, Nationwide's group economist.

"Indications are that following the downward shift in activity and price growth during late 2004, the housing market may be beginning to stabilise."

"Interest rate increases since November 2003, relatively subdued take-home pay growth and stretched affordability have acted as a brake on the housing market," he added.

The UK's third biggest provider of mortgages predicts that property prices will increase by two per cent in 2005, but has warned that a rise of five per cent is also possible due to a shortage of new houses and a "broadly favourable" economic climate.

The Bank of England's Monetary Policy Committee has raised interest rates five times since November last year and considered a further quarter point rise this month before opting to maintain the cost of borrowing at 4.75 per cent.

House prices have tripled since 1995, while wages have risen by just 50 per cent, forcing first-time buyers out of the market. According to Nationwide, fewer people bought their first homes in 2004 than in any other year since the mid 1980s.